indofood agri resources ltd annual report 2015...

INDOFOOD AGRI RESOURCES LTDANNUAL REPORT 2015

39.

InddoAAgrii’s dayy-tooo-daay bbusineess iiss undeerscorred by its

ccommmmitmmennnt too suusstainabiility. Howeevver, as aan agribusiness,

wwee arre eexpoooseed tooo an evoolvingg set ooof risks,, challlenges and

oopporrtunnitiees rrelaatingg to tthhe ennvironnnment, ccommmunities and

vvarriouus ootheeer sstakkeeholderrrs. It iis our goal to mmeet the world’s

ffoood nneeeds in aa moore accooountaable and respponsibble manner.

WWee acchieeve thiis byyy syynerggisingg our work pprocessses across

tthee pllantatiiionss, annnd wworkking ccloselyyy with our smmallholders

aand suppplieeers oon sssustaainaabilityy mannagemennt.

The Group embarked on formal sustainability reporting in 2013. Today, we are guided by formal governance arrangements that include an established Sustainability Policy, as well as programmes, projects and targets.

The Group has earmarked ten material sustainability issues that matter most from both external and internal risk perspectives. These material issues are categorised under five areas: (i) Governance and integrity (ii) Environmental performance (iii) Sustainable palm oil sourcing (iv) Safe, nutritious and traceable products (v) People and communities. To deliver the desired outcomes, the Group’s sustainability efforts are carried out and monitored through six sustainability programmes.

The full details of these programmes and activities, including the key performance indicators, can be found in

our Sustainability Report, which covers IndoAgri’s oil palm plantations and milling operations in Indonesia. The report is prepared annually in accordance with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines and the AA1000 Principles of inclusivity, materiality and responsiveness. To download our latest Sustainability Report, please visit www.indofoodagri.com.

MANAGINGSUSTAINABILITY

CREATING VALUE FOR OUR STAKEHOLDERS

While meeting the growing demand for responsibly produced, high quality palm oil, we endeavour to create employment opportunities and drive economic and social developments in communities where we operate.

At IndoAgri, we have identified our key stakeholder groups to be employees, customers, investors, government and civil organisations, and local communities. We connect, engage and collaborate with them to strengthen our mutual interests and establish common goals. We also define the main stakeholders for each operational site to understand and improve the relationships with each local community. Our stakeholder engagement occurs at different levels of the organisation, across various channels, between individuals and in groups, depending on the relevance and complexity of the issue at hand. The engagement approach is guided by the Group’s sustainability principles, and prioritised according to the materiality of each issue.

A policinic at our estate in Riau

40.INDOFOOD AGRI RESOURCES LTDANNUAL REPORT 2015

The Sustainability Team works closely with senior management, the operating units, as well as suppliers and business partners to champion the Group’s sustainability programmes and projects. Our CEO and board members are directly involved in reviewing the progress and direction of the Group’s sustainability management efforts. Standard Operating Procedures are put in place to enable all employees to deliver on the Group’s policy commitments. To manage the procurement and traceability of our raw materials, the Group’s Palm Oil Sourcing Policy and a set of Responsible Supplier Guidelines have been enforced since 2014.

A centralised Sustainability Management Information System (SMIS), which utilises real-time data captured from our SAP system, allows the Sustainability Team to monitor the Group’s progress against its sustainability targets.

For more information on our Sustainability Policies,

please see www.indofoodagri.com/sustainability.html

MANAGING OUR KEY MATERIAL ISSUES

GGooveeernaanccce aand Integrriity

Material issue:Governance including transparency, business integrity and anti-corruption, risk management

We adhere closely to the principles and guidelines of the SGX’s Code of Corporate Governance 2012, the IndoAgri Code of Conduct as well as other applicable laws, rules and regulations. To support ethical and accountable business conduct, our Growing Responsibly Programme sets the policy framework for high standards of corporate governance, responsibility and professional integrity. Senior management are directly involved in the supervision of data collection that goes towards our annual sustainability reporting.

IndoAgri has also been fully supportive of the ongoing drive by Indonesian and Singaporean authorities in haze management and responsible farming practices. To date, the Group has not received any warning or notice of legal proceedings under the Transboundary Haze Pollution Act in 2015.

EEnnvirrronnmeeental PPPerfformmmancce

Material issue:Carbon management and deforestation Environmental footprintYield maximisation

The agriculture industry in Indonesia relies heavily on certain climatic conditions, such as sufficient rainfall, for healthy plantation estates. GHG emissions are among the factors that adversely impact our air quality, ecosystems

and climate. Sustainable practices relating to forestry, peat lands, agriculture, energy, industry, transportation and waste management can help to mitigate the risks of climate change. Our estates, refineries and mills are guided by sound environmental management practices. Beyond complying with local regulations, the Group is motivated to enhance energy efficiency, increase productivity and be a good steward of natural resources. Our industry faces complex environmental issues, including deforestation, biodiversity, irrigation, soil management, chemical handling and preservation of genetic plant quality. To continue achieving good yields, we must be ready to adapt and change the way we manage the operations.

Our Sustainable Agriculture and Products Programme drives high standards in the adoption of sustainable practices in crop cultivation, palm oil refining and milling. Our factories comply with Indonesia’s environmental regulation. As part of our work on deforestation and habitat loss, we have appointed RSPO-accredited assessors to evaluate the High Conservation Value (HCV) areas in our oil palm estates. We have also introduced guidelines on the management of HCV areas, and a policy that prohibits any new planting on peatlands and HCV areas.

Our Smallholders Programme contributes to our environmental efforts through engaging our plasma farmers. The objective is to enable our smallholders to promote stronger yields and improved cost control through the sharing of good agronomic practices and other innovative processes.


HCV signboard in the estate as a reminder not to disturb or hunt the animals, and protect the HCV area.


41.

At the same time, our Growing Responsibly Programme provides the framework for stakeholder engagement and decision-making on environmental risk management and governance.

SSuustaainaabllle PPalmmm Oiil Sooourcing

Material issue:Product traceability and sustainable sourcing Smallholders including plasma, social conflict resolution

To produce sustainable products, it is important to know whether the raw materials originate from sustainable sources. In 2015, about 64% of the CPO ingredients used in our refineries came from our plantations, while third parties supplied the remaining requirements. For this reason, we have extended our sustainability efforts beyond our operations to include our supply chain where we seek to elevate the standards of food safety, quality and supply chain responsibility using our scale of production and smallholder engagement.

The Group adheres to the principles and criteria of the RSPO, and we continue to expand the number of operations that are RSPO- and ISPO-certified each year. Our Sustainability Report explains why we have chosen to benchmark our practices to RSPO standards, supported by ISPO certification.

Our Safe and Traceable Products Programme ensures that all products from our refineries and mills are traceable. We have introduced a barcode system to ensure that the seeds bred at our facilities can be identified and tracked.

We are on track to achieving RSPO and ISPO standards by the end of 2019 for all the Group’s mills, estates and smallholder

plots. As at December 2015, we have attained RSPO and ISPO certification for 377,000 tonnes and 180,000 tonnes respectively, representing 38% and 18% of our total CPO production in 2015. Additionally, 80% of supply to our refineries is from CPO suppliers who have been pre-audited against the IndoAgri Palm Oil Sourcing Policy.

Our Smallholders Programme offers an effective platform to engage and collaborate with our smallholders on the implementation of RSPO certification. We have a partnership with the Sustainable Trade Initiative (IDH) since 2014 to train and guide our smallholders on RSPO compliance. Plasma and ex-plasma farmers supply about 27% of the total FFB processed in our mills. The first batch of 159 smallholders started RSPO certification audit in 2015.

SSaafe,,, Nuutriitioous aaandd Traaaceabble Prrroductss

Material issue:Product quality and safety

The Group considers food safety to be of paramount importance. Our Safe and Traceable Products Programme ensures that all our products are traceable, safe and beneficial for human consumption through the implementation of food safety management systems and quality assurance processes. Our refinery teams also ensure that product labels accurately describe the nutritional properties and brand claims of our food products. Our factories and processes are fully compliant with the regulatory requirements pertaining to food quality and safety, and our brands and products have continued to garner customer accolades and industry awards in 2015.

A meeting between Company representatives and smallholders in South Sumatra

Food Safety System Certification 22000 (FSSC) for Tanjung Priok Refinery

42.INDOFOOD AGRI RESOURCES LTDANNUAL REPORT 2015

PPeeoppple anddd CCommunitiees

Material issue:Occupational health and safetyHuman rightsLand rights including scarce land resources

As an employer and landowner, we have a duty to provide a high standard of welfare, health and living conditions for our employees and their families who live on our estates. Agriculture, refining and milling are potentially dangerous, and we continually train and educate all employees about workplace safety and health, and embed safe work practices across our estates and facilities.

Our Growing Responsibly programme guides the activities and resource allocation relating to employee engagement and development. Our people management practices are governed by well-established HR policies. The Group also invests in a diverse range of learning and development opportunities – from specialised agronomic courses, to leadership development training and the upgrading of professional skills and competencies – to suit specific roles and job requirements.

Employee profile

Position Total

Management 626

Supervisors 530

Staff 2,133

Administrative and operation staff 37,191

Total 40,480

Our Work and Estate Living Programme covers the safety, health and wellbeing of our workers and communities, as well as aspects relating to their human rights. Occupational Health and Safety (OHS) is managed under the SMK3, which is the Indonesian OHS management system. Today, many of our managers are trained in SMK3 techniques, while the majority of our sites are certified to SMK3 requirements. Despite these measures, we regret to report seven work-related fatalities in 2015. We have investigated these incidents very thoroughly, and taken steps to prevent recurrence.

We respect human rights and contractual agreements, and are committed to dealing fairly and transparently with all our employees and business partners. The management of risks


Employees and committees involved in the Cataract Surgery programme


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relating to diversity, employee retention, labour conditions, freedom of association, child labour and forced labour is core to this effort. In the plantations, which are often in remote locations, we offer facilities and support, that are catered to the needs and comfort of our people.

As land ownership is a complex issue in the agricultural industry involving social, political, historical and religious considerations, we firmly uphold the principle of free prior and informed consent (FPIC) with respect to land purchases from local villages. It is important to IndoAgri that the local villagers, have enough resources for their own livelihood and provisions.

Our Smallholders Programme allows us to foster a closer rapport with our local communities. To alleviate conflicts relating to land rights and to cultivate strong social relationships, we actively engage with local landowners and community leaders. The benefits have been manifold, including the mitigation of theft, protests, roadblocks and other business disruptions.

The Solidarity Programme seeks to empower the lives of people living in and near our estates through community health programmes, financial support for new enterprises and education. Grassroots projects are prioritised and planned, based on the findings and recommendations of ongoing social impact assessments. A doctor performing cataract surgery on a patient

Elementary school students from one of our internal schools in North Sumatra

No of Employees

40,480

Certified CPO

RSPO – 377,000 tonnesISPO – 180,000 tonnes

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indofood agri resources ltd annual report 2015...

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